dos Santos v Unitel SA

Factual and Procedural Background

The appeal concerns two issues arising from a Worldwide Freezing Order ("WFO") granted by Bright J against the Appellant, an engineer and entrepreneur who founded Company A, a major telecoms company in The State. The Appellant was a director and beneficial owner of a stake in Company A until late 2020, when the stake was appropriated by the state. The First Defendant, Company B, incorporated in the Netherlands and controlled by the Appellant, received substantial loans from Company A, which defaulted on interest payments from late 2019/early 2020. Company A accelerated repayment demands and issued proceedings against Company B in this jurisdiction in October 2020 ("the Company B Claim").

In early 2022, Company A's shareholders passed a resolution to make a claim against the Appellant personally. Company A applied in October 2022 to join the Appellant to the Company B Claim and for a WFO against her. Permission to serve out of jurisdiction was granted in January 2023. The joinder, amendment, and service applications were partly granted in May 2023, and the claim against the Appellant was served in June 2023. Permission to appeal that order was refused in October 2023 but later granted in March 2024 on important points of law.

The WFO application was heard in November 2023, and judgment granting the WFO was handed down in December 2023, with costs ordered against the Appellant. Permission to appeal was refused initially but later granted.

Legal Issues Presented

1. The meaning of the "good arguable case" element of the test for granting a freezing injunction and whether the judge was correct in finding that Company A had such a case.
2. Whether there is a general rule that the costs of a WFO application should be reserved.

Arguments of the Parties

Appellant's Arguments

• The "good arguable case" test should be understood as the three-limb test derived from jurisdictional gateway cases (Brownlie test), requiring the claimant to have "the better of the argument" rather than the traditional Niedersachsen test.
• The claim against the Appellant was brought too late under the relevant Commercial Companies Law ("CCL") of The State, particularly relying on Article 80(1) of the CCL, which requires an indemnity action to be filed within six months of a shareholder resolution.
• The judge was wrong to order the Appellant to pay costs of the WFO application; the ordinary rule is that costs should be reserved for interim injunctions, including freezing injunctions, absent special circumstances.

Respondent's Arguments

• The traditional "good arguable case" test as formulated in The Niedersachsen remains good law and is appropriate for freezing injunctions; the three-limb jurisdictional test should not apply.
• Company A had a good arguable case on the merits, supported by expert evidence that the filing of the joinder application was equivalent to filing a claim within the statutory six-month period under Article 80(1) of the CCL.
• The Appellant had fought the WFO application on every point and lost, justifying an order for costs against her rather than costs being reserved.
• The nature of freezing injunctions differs from other interim injunctions, supporting a different approach to costs.

Table of Precedents Cited

Court's Reasoning and Analysis

The court addressed the two main issues raised on appeal: the meaning of the "good arguable case" test in freezing injunctions and the approach to costs in WFO applications.

On the merits threshold, the court analysed competing legal authorities and expert evidence concerning the relevant foreign law (Article 80(1) of the Commercial Companies Law). The court acknowledged divergent views on whether the "good arguable case" test for freezing injunctions should align with the three-limb test used for jurisdictional gateways or remain as the traditional Niedersachsen test.

The court found the law on the meaning of "good arguable case" in freezing injunctions to be confused but concluded firmly that the correct test remains that formulated by Mustill J in The Niedersachsen: a case that is more than barely capable of serious argument, without requiring the claimant to have the better of the argument or a greater than 50% chance of success. The three-limb jurisdictional test was rejected as inappropriate for freezing injunctions because it risks mini-trials and imposes a higher threshold not suitable at the interlocutory stage.

The court applied the Niedersachsen test to the facts and held that Company A had a good arguable case on the key point of foreign law, supported by credible expert evidence. The court rejected the assertion that the expert evidence was unreliable or that the claim was time-barred under Article 80(1).

Regarding costs, the court distinguished freezing injunctions from other interim injunctions, noting that freezing injunctions are not "interim" in the same sense and remain in place until trial. The court held that the usual approach of reserving costs in interim injunctions does not automatically apply to freezing injunctions. Given the Appellant's full and unsuccessful contest of the application, the court found it appropriate for her to pay Company A's costs of the WFO application. The court emphasized that the discretion to reserve costs remains but is not the norm in contested freezing injunction applications.

The court also considered the broader jurisprudential context, including Commonwealth authorities, and found widespread support for the Niedersachsen test as the appropriate merits threshold for freezing injunctions.

Finally, the court agreed with the view that the "good arguable case" test in freezing injunctions is effectively equivalent to the "serious issue to be tried" test applied in other interlocutory injunction contexts, advocating for clarity and consistency in terminology and application.

Holding and Implications

The court DISMISSED the appeal on both grounds.

The holding confirms that the "good arguable case" test for the grant of freezing injunctions remains the traditional Niedersachsen test and does not adopt the three-limb jurisdictional gateway test. The court upheld the judge's finding that Company A had a good arguable case on the merits, including on the foreign law limitation point.

On costs, the court upheld the order that the Appellant pay the costs of the WFO application, clarifying that the usual costs-reserved approach for interim injunctions does not automatically apply to freezing injunctions, especially where the respondent contests the application fully and unsuccessfully.

No new precedent was set beyond confirming the established legal principles and clarifying the costs approach in freezing injunction applications. The decision reinforces the established legal framework for freezing injunctions and provides guidance on the appropriate application of the merits threshold and costs discretion in such cases.